Do Business Well

Keith Krach, Ariba’s chairman, chief executive officer, and cofounder, told me that to launch the company, he focused on signing up a few large companies with nearly unlimited buying power. After attracting Cisco, FedEx, Bristol-Myers, Chevron, Hewlett-Packard, IBM, and companies of similar ilk, it wasn’t long before more than twenty thousand sellers registered to make their product lines available through Ariba’s network.

The collaboration with Cisco began even before Ariba had a finished product. Krach recalls, “They were about ready to develop their own [network, but when] we blindly exchanged product specifications, there was a ninety-five percent overlap. Then we had them meet our people . . . [who] wanted to review our quality assurance process, wanted to see all our product development schedules.” That initial effort eventually resulted in Cisco transacting $1.5 billion annually across the Ariba network.

For other customers, one of Ariba’s many innovative ideas was to standardize the size of the information displays in the sellers‘ product catalog so that buyers could easily make side-by-side comparisons. Additional features that please both buyers and sellers include Ariba’s highly expedient and information-rich order management routines. Triggering many of these innovations was the company’s practical way of gathering input from collaboration- oriented customers. First, Ariba held dozens of individual conversations with buyers and sellers, each of whom was asked to identify and clarify the issues significant to him or her. Then the company formed an advisory council that brought most of the participants together and invited each member to present to the others his or her idea of an ideal solution. Twenty-five hundred people participated in the council’s most recent, its fifteenth, session. Krach is considering splitting up future sessions so they can focus on collaborative opportunities within specific jobs and industries.

The value Ariba delivers to its clientele transcends its efficienttransaction network. In Krach’s words, “We help [our customers] with their overall business strategies. Should they form a separate business unit, or a new company, to benefit from Ariba’s e-commerce platform? If so, what’s the revenue model? Or what are the value-added services our customers could provide to their customers? How should they divide up equity if they set up a new company?” Furthermore, Ariba leverages its expertise by working with customers to discover new applications for its business. For example, after signing American Express and Bank of America, the company developed an electronic payment utility. And it has created an interface that allows customers to connect their own electronic hubs to Ariba’s network, and to do so seamlessly. With skill and finesse that will be difficult to mimic, Ariba has exploited complexity successfully to break new ground.

Commenting on partnerships and alliances, Krach concludes: “I think people who believe that they can go it alone in B-to-B e-commerce are naive. I think a key critical success factor is your ability to partner and create an ecosystem. I think that’s clearly been one of the keys to our success. . . . [You] strive for a sixty/sixty deal where both parties . . . believe that they’re getting the best part of the deal, because that’s the only way that you’re going to be able to have a long-term, sustaining relationship. If it’s fifty-one/forty-nine, one of the guys feels that he’s getting ripped off and it will never last.”

On that note, let’s move on to the next strategy to win with collaborators.

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